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Closed-End Funds Leverage and Swaps
All Calamos closed-end funds may issue auction rate preferred shares or short-term debt to increase assets available for investment in an effort to enhance yield or total return. The borrowing vehicles the funds currently use include commercial paper, extendible notes, margin loans and auction rate preferred securities. Auction rate preferred securities are long-term fixed-income securities with adjustable rate coupons that typically reset after a set period—generally every seven to 28 days. Click here to learn more.
In its simplest form, an interest rate swap is a contractual agreement to exchange (or swap) one set of cash flows for another set. For a leveraged closed-end fund, the swap allows the manager the potential to better manage the fund's cost of leverage by swapping its floating-rate liability (rate on the preferred) to another party for a fixed rate. Click here to learn more.
7-Day Preferred Auction Rate as of 1/6/2009
| Fund Name |
1/5/2009
Monday |
1/6/2009
Tuesday |
12/31/2008
Wednesday |
12/31/2008
Thusday |
1/2/2009
Friday |
Rolling
90-Day
Average |
|
|
0.21% |
-- |
0.20% |
0.20% |
0.20% |
1.10% |
|
|
0.21% |
0.15% |
0.20% |
0.20% |
0.20% |
1.11% |
|
|
0.44% |
0.45% |
0.58% |
0.58% |
0.47% |
1.95% |
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|
0.44% |
0.45% |
0.58% |
0.58% |
0.47% |
1.95% |
|
|
-- |
-- |
-- |
-- |
-- |
-- |
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* CGO Auction Rate Preferred Refinancing Announcement (click here)
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28-Day Preferred Auction Rate as of 1/6/2009
| Fund Name |
Last Auction Date |
Rate |
Next Auction Date |
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Tuesday |
1/6/2009 |
0.39% |
2/3/2009 |
Series W28 |
12/31/2008 |
0.51% |
1/28/2009 |
Series TH28 |
12/11/2008 |
0.51% |
1/8/2009 |
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Series A |
12/10/2008 |
1.19% |
1/7/2009 |
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Series A |
12/10/2008 |
2.16% |
1/7/2009 |
Series B |
12/11/2008 |
1.79% |
1/8/2009 |
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Swap Maturity Characteristics as of 11/30/08
| Fund Name |
Total % of Leverage Swapped |
Maturity |
Notional Amount |
% of Total Swap |
Swap Rate |
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35.78% |
06/2009 |
$200,000,000 |
100.00% |
4.34% |
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Important Fund Information
Leverage creates risks which may adversely affect return, including the likelihood of greater volatility of net asset value and market price of common shares; and fluctuations in dividend rates on any preferred shares.
The use of swap transactions involves investments techniques and risks that are different from those associated with portfolio security transactions. If Calamos is incorrect in its forecasts of market values, interest rates, and other applicable factors, the investment performance of the Fund will be less favorable than if those techniques had not been used. Those instruments are typically not traded on exchanges. Accordingly, there is risk that the other party to certain of these instruments will not perform its obligations to the Fund or that the Fund may be unable to enter into offsetting positions to terminate its exposure or liquidate its position under certain of these instruments when it wishes to do so. Such occurrences could result in losses to the Fund.
Shares of closed-end funds frequently trade at a market price that is below their net asset value.
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